Kevin Hassett says Fed economists should be 'disciplined' over tariff study

• The New York Fed study found U.S. firms and consumers absorbed 86% of tariff burden as of November 2025, with foreign exporters bearing only 14%, while average tariff rates jumped from 2.6% to 13% during 2025
• The Congressional Budget Office reached similar conclusions, finding foreign exporters absorb about 5% of tariff costs and projecting tariffs will increase PCE inflation by 0.8 percentage points by end of 2026
• Hassett defended the tariffs by claiming 'prices have gone down' and consumers are 'better off,' with real wages up $1,400 on average last year, contradicting the Fed researchers' findings

Summary:

White House economic advisor Kevin Hassett called for Federal Reserve economists to be "disciplined" over a New York Fed research paper examining the impact of Trump administration tariffs. Hassett labeled the study "the worst paper I've ever seen in the history of the Federal Reserve system" during a CNBC interview.

Key Findings of the Disputed Research:

The New York Fed study found that U.S. businesses and consumers bore 86% of tariff costs as of November 2025, with foreign exporters absorbing only 14%. The research showed average tariff rates jumped from 2.6% at the beginning of 2025 to 13% by year-end, peaking at 16% in April-May following Trump's "Liberation Day" tariff announcements.

The Congressional Budget Office (CBO) released similar findings, showing foreign exporters absorbing approximately 5% of tariff costs, with 95% falling on U.S. firms and consumers. The CBO projected tariffs would increase the Personal Consumption Expenditures (PCE) index by 0.8 percentage points by end of 2026. PCE inflation currently stands at 2.8%, above the Fed's 2% target.

Market Implications:

Hassett disputed the findings, claiming consumers benefited from tariffs, citing real wages up $1,400 on average last year and declining import prices. The controversy highlights political tension between the White House and Federal Reserve research, potentially impacting Fed independence perceptions.

Companies/Sectors Mentioned: South Korea (subject to 25% tariff hike), India-EU trade relations, U.S. import-dependent businesses.

The clash between administration officials and Fed research raises questions about economic policy credibility and market confidence in inflation trajectory assessments.